Monthly Archives: May 2008

Why ETF-Squareds Are a Bad Investment

Posted on May 23, 2008 by Felix

Floyd Norris today brings up the question of mutual fund fees, which gives me a good excuse to revisit the ETF-squareds I wrote about yesterday. By coming up with an extra service (quarterly rebalancing) they justify an extra 25bp in … Continue reading →

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Extra Credit, Thursday Edition

Posted on May 22, 2008 by Felix

Amazon – The Stock that Defies Gravity: "Goldman has a novel argument: Amazon has now proven its business model, so itßís safe to assume stable margins going forward. I thought it was supposed to be the other way around." Odd … Continue reading →

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Canadian Law: No Friend to LBOs

Posted on May 22, 2008 by Felix

The news out of Quebec today really is quite stunning: a court has held that bondholders in Canada can effectively block a leveraged buy-out if their bonds will be downgraded to junk (as most are, in such situations). Steven Davidoff … Continue reading →

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Annals of Hypocrisy, John Mackey Edition

Posted on May 22, 2008 by Felix

Thanks to Jeff Cane for alerting me that John Mackey is back, and defending his sockpuppet antics: I strongly believe in the First Amendment of our Constitution and our right as citizens to express our opinions to each other. I … Continue reading →

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The Romer-Harvard Affair

Posted on May 22, 2008 by Felix

If you haven’t been following the peculiar story of Harvard’s failure to poach Christina and David Romer from Berkeley, Shan Wang of the Harvard Crimson has a good round-up. Basically, it was all going to happen, until the very last … Continue reading →

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The Economics of Carl Icahn

Posted on May 22, 2008 by Felix

Carl Icahn has an interesting take on basic macroeconomics: Icahn kicked off his political rant by saying that it would be "devastating" if this country elected a Democratic president… He said that "Obama doesn’t understand the economy," adding that he … Continue reading →

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Trickle-Down Economics, Art Edition

Posted on May 22, 2008 by Felix

There’s been a lot of talk about the UK’s "non-doms": rich foreigners who generally live in very expensive London property, thereby driving up the cost of living for everybody else while paying little or nothing in the way of taxes. … Continue reading →

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The Fed Scales Back its Growth Forecasts

Posted on May 22, 2008 by Felix

A quick note about the new GDP forecasts from the Fed: Policy makers estimate U.S. gross domestic product will increase by 0.3 percent to 1.2 percent this year, compared to the 1.3 percent to 2 percent growth they predicted in … Continue reading →

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Is Ben Bernanke Too Inventive?

Posted on May 22, 2008 by Felix

Steve Waldman has a great description of the powerful and inventive Ben Bernanke today: Our man Ben is like an Amadeus-cum-MacGyver, he’s brilliant, unpredictable, he’ll improvise a Delaware company from paper clips and vacuum up your derivative book with a … Continue reading →

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The ETF-Squared: It Reallocates For You

Posted on May 22, 2008 by Felix

Remember Ron Lieber’s catchy little slogan? "Index (mostly). Save a ton. Reallocate infrequently." Turns out, here’s a new ETF out there which doesn’t just do the indexing for you, it does the reallocation as well. To be precise, there are … Continue reading →

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When Hedges Fail

Posted on May 22, 2008 by Felix

Here’s a gentle reminder for CFOs and risk officers at major international banks: if you hedge your position but you don’t hedge it 100%, then you haven’t fully hedged your position. Last month, it was UBS, which made a decision … Continue reading →

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Moody’s Brings In the Lawyers

Posted on May 22, 2008 by Felix

Moody’s second statement on the CPDO scandal shows – in the wake of their stock falling 16% yesterday and Chuck Schumer breathing fire – that they’re finally beginning grok just how serious it is. The first statement, you’ll recall, merely … Continue reading →

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Extra Credit, Wednesday Edition

Posted on May 21, 2008 by Felix

Stocks Don’t Like Obama: Kudlow descends into self-parody. "This idea of rewarding work instead of wealth is just insane"! Stein’s law, China edition … What can not go on forever: "Chinese exports are still expanding by about $250b a year. … Continue reading →

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FT Story Hammers Moody’s Stock

Posted on May 21, 2008 by Felix

The stock market has spoken: Moody’s shares are down 14% today in the wake of the ratings scandal uncovered by the FT. Portfolio did a good job of rounding up the reactions, including a unwisely dismissive piece by the WSJ’s … Continue reading →

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Car-Commute Datapoint of the Day

Posted on May 21, 2008 by Felix

SAR has a provocative back-of-the-envelope calculation today: At $4.00 a gallon, a minimum wage earner driving the average 15,000 miles a year will spend 25% of his/her after-tax income on gasoline. I’m not sure whether this includes things like the … Continue reading →

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The Economics of DVD Rentals

Posted on May 21, 2008 by Felix

Aaron Schiff says that it’s "very cheap" to rent a DVD in Japan: he pays ¥350 ($3.39) for an overnight new release. Here in Berlin, it’s €3.40 ($5.36) to rent a DVD overnight. But there’s a twist: the headline rental … Continue reading →

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Green Berlin

Posted on May 21, 2008 by Felix

Paul Krugman joins me in Berlin: Consider where I am at the moment: in a pleasant, middle-class neighborhood consisting mainly of four- or five-story apartment buildings, with easy access to public transit and plenty of local shopping. It’s the kind … Continue reading →

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Pimco Datapoint of the Day

Posted on May 21, 2008 by Felix

Bill Gross has enormous latitude to invest his Total Return Fund wherever he likes. But even so, investors who have entrusted that fund with well over $100 billion might raise their eyebrows at this: As of April 30, Gross’s Total … Continue reading →

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The Time Warner Cable Control Premium: $0

Posted on May 21, 2008 by Felix

MarketWatch has a good summary of the rather complex deal by which Time Warner plans to spin off Time Warner Cable. But something here doesn’t make a lot of sense to me. Time Warner currently own 84% of Time Warner … Continue reading →

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A New Moody’s Rating Scandal

Posted on May 21, 2008 by Felix

The FT has an explosive story today about the market in CPDOs, and the way that Moody’s, in particular, rated them. The problem is that CPDOs are so ridiculously complex that this scandal – and it is a scandal – … Continue reading →

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Commercial Real Estate Datapoint of the Day

Posted on May 21, 2008 by Felix

In April last year, the New York Observer declared the GM Building to be "the most valuable building in the world," and quoted Scott Latham of Cushman & Wakefield as saying it was worth more than $4 billion. Today, the … Continue reading →

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It’s Time to Pay Sales Tax Online

Posted on May 21, 2008 by Felix

It’s rare that I unreservedly praise a WSJ column – after all, where’s the fun in that. But Lee Gomes today is entirely correct that the time has long since come for web-based merchants to start collecting sales tax. Do … Continue reading →

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Extra Credit, Tuesday Edition

Posted on May 20, 2008 by Felix

Break up AIG! Robert Thomson Named WSJ’s Managing Editor: To absolutely nobody’s surprise. High-End Homes Sold as Art: I’m quoted in this NPR feature on collectible architecture, which aired on All Things Considered today. Huntington Hartford, A. & P. Heir, … Continue reading →

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CDS Counterparty Risk and the Bear Stearns Bailout

Posted on May 20, 2008 by Felix

Jesse Eisinger points me to David Evans’s 4,400-word article on credit default swaps; he likes it a lot. Me, not so much. If it were shorter, it wouldn’t bother me so much. But if you’re writing at that sort of … Continue reading →

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Rich-Poor Inflation Differentials: Smaller Than You Might Think

Posted on May 20, 2008 by Felix

Steve Levitt helpfully provides a link to the Broda and Romalis paper that Jim Surowiecki references this week, and whose findings I found so startling. After reading the paper, whose findings on inflation rates are by no means easy to … Continue reading →

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